Chapter 4, Problem 62P

(Appendix 4A) Overhead Application, Journal Entries, Job Cost

At the beginning of the year, Smith Company budgeted overhead of $129,600 as well as 13,500 direct labor hours. During the year, Job K456 was completed with the following information: direct materials cost, $2,750; direct labor cost, $5,355. The average wage for Smith Company employees is $17 per hour.

By the end of the year, 18,100 direct labor hours had actually been worked, and Smith incurred the following actual overhead costs for the year:

Required:

1. 1. Calculate the overhead rate for the year.
2. 2. Calculate the total cost of Job K456.
3. 3. Prepare the journal entries to record actual overhead and to apply overhead to production for the year.
4. 4. Is overhead overapplied or underapplied? By how much?
5. 5. Assuming that the normal cost of goods sold for the year is $635,600, what is the adjusted cost of goods sold?